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Article
The relationship between inflation and inflation uncertainty in emerging market economies
Southern Economic Journal (2007)
  • John Thornton
Abstract
A standard Generalized Autoregressive Conditional Heteroskedastic (q,v) model is employed to construct a measure of monthly intlation uncertainty in 12 emerging market economies, and the relationship between inflation and inflation uncertainty is examined using Granger causality tests. The results suggest that higher inflation rates increased inflation uncertainty in all the economies, providing strong support for the Friedman hypothesis. The evidence on the effect of inflation uncertainty on average monthly inflation is more mixed, with increased inflation uncertainty leading to lower average inflation in Colombia. Israel. Mexico, and Turkey, consistent with the Holland hypothesis, but to higher average intlation in Hungary. Indonesia, and Korea, consistent with the hypothesis of Cukierman and Meltzer.
Keywords
  • Inflation,
  • inflation uncertainty,
  • emerging market economies,
  • GARCH
Publication Date
2007
Citation Information
John Thornton. "The relationship between inflation and inflation uncertainty in emerging market economies" Southern Economic Journal Vol. 73 Iss. 4 (2007)
Available at: http://works.bepress.com/john_thornton/5/